Worcester Wreath awarded nearly $1M in lawsuit against L.L. Bean

By Tom Walsh, BDN Staff
Posted Feb. 23, 2012, at 6:44 p.m.

HARRINGTON, Maine — Maine-based retail giant L.L. Bean has been ordered to pay Washington County wreath producer Worcester Wreath Co. of Harrington just under $1 million to settle a contentious and long-lingering dispute over balsam product production during the 2008 holiday season.

In a complicated, 79-page finding that details how the wheels came off a 26-year business relationship between the two firms, Maine Business and Consumer Court Judge A.M. Horton ruled, in effect, that L.L.Bean had ordered more wreaths and other balsam products for the 2008 Christmas season than it was ultimately able to sell.

As a result, Horton ruled, Worcester is entitled to compensation for ramping up for anticipated production of products ordered and for purchase of components needed to produce those products — balsam tips, decorations and wire wreath frames — that were ultimately never sold.

L.L. Bean spokesperson Carolyn Beem said Thursday that no decision has been made on appealing the ruling.

“We attempted to resolve this situation without the need to litigate,” she told the Bangor Daily News late Thursday. “Worcester was seeking exorbitant sums, which it failed to recover. We feel corrections need to be made, in terms of seeking an adjustment, but no decision has been made on an appeal.”

Tim Woodcock, a Bangor attorney who represented Worcester, described the whole legal and financial scenario as a “sad story that is ultimately ending in a positive situation.”

“This was a 26-year dream relationship in which L.L. Bean was using Maine materials to make Maine products that were literally sold throughout the world,” he said. “L.L. Bean and Worcester pioneered this whole market together. Worcester is a long-standing presence in the economy of Down East Maine, and L.L. Bean couldn’t just walk away, in terms of Worcester’s obligations to the bank. It’s a very positive decision in that Worcester is now able to use this payment to fulfill its obligations to its bank.”

The business relationship between the two companies dates to 1983 and was continued without interruption through 2008, with new negotiations each year over how many balsam products — wreaths of various sizes and decor, balsam centerpieces, kissing balls and other fresh and perishable balsam products — would be required that year to meet L.L. Bean’s anticipated customer demand.

By 2008, L.L. Bean purchase orders accounted for 90 percent of Worcester’s business, the ruling states. During the 2007 Christmas season, L.L. Bean sold 478,000 units of Worcester products and had anticipated even higher sales while negotiating a business agreement for 2008. Due to economic recession in 2008, those higher sales never materialized. That year L.L. Bean placed orders from Worcester for 74,085 items that were never sold.

Horton’s analysis of the chapter and verse of the civil action details a complicated morass of legal, accounting and just-in-time manufacturing issues during the run-up to the 2008 holiday season. It also details the nuances of negotiations that followed over who was owed what during a litany of disagreements that resulted in L.L. Bean ending its relationship with Worcester in May of 2009. Ultimately, Horton concludes that “L.L. Bean has failed to show that Worcester intentionally or willfully breached its contract.”

Complicating the whole impasse was Worcester’s effort at the time to leave a long-established line-of-credit banking relationship with Machias Savings Bank while forging a new banking relationship with the Chittenden Bank and the Massachusetts Business and Development Bank. Making that transition required Worcester to settle up with Machias Savings Bank, and Worcester looked to L.L. Bean to front the funds required, with Worcester promising to repay the outdoor outfitter once the new line of credit was established.

L.L. Bean negotiators termed such a financial arrangement “extremely rare,” also expressing concerns about “very large” environmental fines that had been assessed to Worcester and what L.L. Bean considered “dubious” hiring practices within the Worcester firm. Ultimately, L.L. Bean agreed to take title to and pay for $582,000 worth of balsam product components that could be used in future-year production. L.L. Bean also notified Worcester that, as the wreath-maker appeared not to be in compliance with its ethical standards, it risked loss of L.L. Bean’s business, pointing out that L.L. Bean had “zero tolerance” for human rights and workplace safety violations.

L.L. Bean also put the company on notice that it would not be placing all of its balsam products business with Worcester and that some production would go to cross-county rival Whitney’s Originals. That upset Worcester owner Morrill Worcester, who told L.L. Bean that, in his view, it was an all-or-nothing business relationship.

In a May 1, 2009, letter to Worcester, L.L. Bean discontinued its long-standing relationship with Worcester, which turned its production volume to its “Wreaths Across America” program. That holiday-season effort each year now sells tens of thousands of wreaths to veterans groups and other organizations that use decorated wreaths to mark the graves of military veterans at Arlington National Cemetery and hundreds of other military burial sites throughout the U.S.

In the end, Horton granted judgement to Worcester in the amount of $961,811.

http://bangordailynews.com/2012/02/23/news/down-east/worcester-wreath-awarded-nearly-1m-in-lawsuit-against-l-l-bean/ printed on July 26, 2014